June 23, 2010 (Chinavestor) Investors in Hong Kong shrugged off weak U.S. housing data and continued to snap up undervalued China stocks on Wednesday. The Hang Seng Index (INDEXHANGSENG:.HSI) advanced 37.5 points or 0.2 percent to 20,856.61. Citigroup (NYSE:C) upgraded Huaneng Power Int. (HKG:0902) (NYSE:HNP), the largest Chinese independent power producer, to "buy" from "hold" increasing target price to HK$ 5.50 from HK$5 a share. The company reported record daily power output for May 2010, an increase of 35 percent from last year. Huaneng Power H-shares (HKG:0902) rose to HK$4.50 on Wednesday. Huadian Power (HKG:1071), a large hydro power producer from the south, jumped 6.1 percent following abundant rain in the region.
Traders were concerned about tightening policies on the Mainland sending the Shanghai Composite Index (SHA:000001) 18.8 points or 0.7 percent lower to 2,569.87 by the close. Steel companies fell the hardest following news that export tax rebates will shrink for steel and iron. Baoshan Inron & Steel (SHA:600019), the largest Chinese steel company, fell 2.7 percent while Wuhan Iron & Steel (SHA:000005) shed 1.3 percent.
Index futures point to a higher open for U.S .equities, helping Chinese ADRs along the way. Based on its Hong Kong performance, expect Huaneng Power (NYSE:HNP) to outperform the market while Yanzhou Coal (NYSE:YZC) is expected to feel a pinch.
Oversold stocks might pop while momentum China ADRs are expected to extend their rally. For a detailed stock specific analysis visit the Overbought/Oversold section of Chinavestor.com.